With the stock market performing phenomenally well over the past few years, many parents are wondering if investment accounts for kids are a good option for their child. Certificates of deposit, while still a great way to save money, are often just barely higher than inflation and don’t provide much growth potential. Getting your child involved in investment accounts for kids can help them learn about financial management. Here are some tips for parents to consider.
Open an account with an online broker. Look for low account fees and no minimum initial deposit, since this will allow your child to invest in small amounts. Look for a broker that offers a variety of investment options and provides free investing advice and educational content. For instance, you can open a brokerage account with Fidelity and let your child choose the stocks and bonds that they would like to invest in. Fidelity offers a broad range of investing options, no minimum deposit requirements, and no account fees. You can also withdraw money from your child’s account on his or her behalf.
While any age is appropriate to open an investment account for kids, the best time to start is around age eight. A younger child will learn more from an investment account if they are given more time to grow it. On the other hand, older children will be more likely to take advantage of an investment account and be interested in learning about investing. However, you should remember that older children may have more questions than you are comfortable asking. Once your child has mastered basic investment concepts, it’s time to move on to advanced investing.
While investing for kids may seem like a great idea, there are some risks associated with it. It can be a great way to teach your child about money and how to manage it, as well as a way to limit the need for education debt. Regardless of whether you opt for a tax-qualified investment account, it is important to consider the benefits of different types of investment accounts for kids and decide on the one that suits your child’s needs and interests.
While investing in stocks and mutual funds is a great way to help children learn about the stock market, you should consider introducing your child to it at a young age. Investing in stocks, for example, can help them understand how profits and losses work. If you can’t start with a formal investment account, consider starting with a low-cost index fund. Your child can even learn about how mutual funds work, and the advantages and disadvantages of each type of investment.
If your child is a girl, you should consider investing in a government-sponsored account for her. This account has a lock-in period and earns 7.6% interest a year, which is one of the highest rates among other financial instruments. You can also choose to invest an additional amount of money in her account to keep it active and earning interest on the money. In addition to helping your child learn financial concepts, these funds can help lay a firm financial foundation as she grows up.